A class action lawsuit against Ripple Labs was filed on Thursday. This was in the superior court of San Francisco, California. The lawsuit is for allegedly offering and selling unregistered securities.
Ryan Coffey filed the lawsuit, on behalf of himself and of all the investors who bought Ripple tokens (XRP). Coffey is represented by Taylor-Copeland Law. “Taylor-Copeland Law was one of the first firms in the country to focus on blockchain and crypto-currency law.” according to its website.
The Lawsuit filed against XRP
Coffey bought 650 XRP on January 6 this year, at $ 2.60 each, and sold them on January 18 at $ 1.70. In brief, the plaintiff claims that the defendants have obtained massive gains in violation of state and federal securities laws by selling XRP. Also, XRP carried an Initial Currency Offering ( ICO ) “that never ends”. In the lawsuit, it is also claimed that the XRP has all the characteristics of a security. This is hidden when selling it through cryptocurrency exchanges.
The arguments of Coffey against the defendants also highlights the fact that XRP is not mined. The lawsuit states 100 billion XRP, created by Ripple Labs in 2013. In those which Ripple Labs reserved the 20% to be distributed among the founders of that company.
In the US, much of the legal discussion about cryptocurrencies is now focused on ICOs. Also whether the tokens sold in those offers are securities or not.
“Whether or not XRP is a security is for the SEC to decide. We continue to believe XRP should not be classified as a security.” said Ripple spokesman Tom Channick.
If they are not securities, in principle there would be no illegality. But if a token is considered a value according to the Howey test, it would have to be subject to the laws that govern the issuance of securities. The Securities and Exchange Commission (SEC) of the US has at least recognized that not all ICOs are illegal. Even if a token is a security today, it may stop to be tomorrow.
The lawsuit that its main argument is based on XRP tokens are securities or not. Also, it insists on qualifying the sale of these as “not registered”.
This is a class action lawsuit on behalf of all the investors who purchased Ripple tokens, issued and sold by the defendants. This arises from a conspiracy of the defendants to raise hundreds of millions of dollars through the unregistered sale of XRP to investors, in violation of the registration provisions that are in state and federal securities laws. said James Taylor Partner, Taylor-Copeland Law Firm
Coffey’s loss in his investment on XRP is negligible compared to the costs of the demand. This also suggests that there is a well-calculated legal strategy, not to recover the $585 that the plaintiff lost in his investment, but perhaps a million dollar sum as compensation if the court establishes that the tokens are securities. This could be a medium-term loss for future ICOs, at least in the state of California.